Updated January 7, 2021
Updated January 7, 2021
Despite Europe’s large population, tremendous spending capacity, and consumers’ liberal attitudes toward cannabis, the region has shied away from more progressive policy regarding cannabis which has resulted in its markets largely taking a back seat to those of its North American peers.
Though international bodies such as the United Nations (UN) – largely influenced by and influential in Europe – have continued to express opposition, there appears to be growing interest in more permissive policy with regard to cannabis scheduling. For example, in early 2019, the World Health Organization (WHO) formally recommended that cannabis be rescheduled to a less strictly regulated category, and though the United Nations Commission on Narcotic Drugs’ (CND) delayed the vote on rescheduling twice, it was ultimately decided in December 2020 (by a narrow majority) that cannabis and cannabis resins should be removed from Schedule IV and placed in Schedule I. Though it remains under tight international controls, the move tacitly acknowledged the medical value of cannabis. Meanwhile, countries throughout Europe have been actively developing and adapting regulatory systems to open, build upon and expand cannabis operations despite traditionally having been among the most conservative developed nations to move forward with cannabis legislation. Though advances have been made in a measured fashion, nonetheless, regulatory frameworks and markets are taking shape – with some European countries even broaching adult-use cannabis authorization.
Today, the European legal cannabis market remains rather small, but it is poised to grow rapidly as more supportive country- and continent-level (or global) regulations continue to be put in place, paving the way for more stable and scalable medical cannabis growth. Many countries have chosen to authorize medical cannabis sales, though typically under restrictive regulatory frameworks that loosen (UK) or adapt (Denmark) over time. Most remain in early stages, only seeing incremental growth at this juncture, though the progress seen in Germany will lead the way in driving a US $359 million cannabis market in Europe in 2020. Brightfield anticipates medical cannabis – and to a limited extent, adult-use – will expand significantly over the next five years, reaching a total value of $3.1 billion by 2025.
The primary medical cannabis market in Europe today is Germany – ahead by a huge margin – followed by Italy and Denmark. More medical markets are close to emerging after much anticipation, such as that of France, and we expect to see some incremental growth of adult-use markets in the Netherlands in 2021 (through a government experiment allowing for a shift of supply to a legal framework, with product to be sold through existing coffee shop channels in limited regions), and Switzerland the year following. The report pages below include analyses of regulatory structures and market conditions in each country, highlighting the pros, cons, prospects and potential stumbling blocks of operating in each market.
Though cannabis sales were expected to drop in 2020 as a result of the effects of COVID-19 on supply chains and patient enrollment, on the contrary, they have risen by 28% year-over-year. Economic troubles are plaguing the continent and dampening spending overall as a result of the ongoing COVID-19 pandemic, but this has impacted cannabis spending very minimally, especially among cannabis patients who receive insurance coverage. In many cases, cannabis is a last-resort medication thus it receives spending priority. In others, increased telehealth access driven by the pandemic has actually ushered in more cannabis patients than would otherwise have had access or the willingness to enter their physicians’ offices in search of cannabis, driving patient growth. In addition, supply chains have experienced only minor hiccups in the region despite the tremendous amount of transatlantic and inter-continental shipping the European cannabis market depends on. With few real setbacks in 2020 despite the backdrop of a volatile and vulnerable global economy, Europe’s overall cannabis market is on course to grow and thrive as it builds on its current infrastructure, breaking the US $1 billion mark for the first time in 2022.
The UN Commission on Narcotic Drugs (CND) is looking more and more likely to readdress its guidelines and encourage fewer restrictions on medical cannabis, with the support of the WHO recommendations and many country leaders, businesses, industry and trade associations in the region working to have these changes enacted sooner rather than later. Though strictly speaking, nations can and have acted outside the bounds of UN conventions, European countries are among the most likely to adhere to them. Thus, any UN decision in favor of cannabis would be particularly influential upon the growth and acceptance of cannabis in the region.
In recent years, an increasing number of European countries have begun adopting policies allowing medical cannabis products into the market beyond finished pharmaceuticals (e.g. Sativex, Marinol), which has opened up the market to a great deal of new consumers who either did not have a need for these specific formulations, or who could not afford their hefty price tags. In addition, more liberal regional and national stances toward cannabis, especially as reflected in policy and regulatory adjustments, are encouraging a greater number of physicians to consider and prescribe cannabis. Doctors continue to act as an important barrier to patient growth, thus the buy-in of these gatekeepers – attained through wider political and cultural acceptance, local-level education and advocacy – is and will continue to be vital to medical market growth.
2021 will see both the Dutch coffee shop experiment and French and Swiss medical pilot programs come online, though while the former and latter are poised to see significant growth over the forecast period, those supplying France’s pilot must furnish product for free – thus no sales will take place until an expected medical program launches following the three-year trial's conclusion, leading to substantial growth beyond 2024.
Ultimately, as more patients, doctors, pharmacists and government decision-makers are exposed to functional regulated cannabis programs and the legitimacy of cannabis as medicine continues to be more broadly recognized, more support for legalization, accessibility and affordability (including via insurance coverage) will build, generating a gradual swell across the region.
The evolution of European cannabis markets has been distinct from that seen in most other developed nation markets. In North America, for example, many US states and the Canadian federal system have largely used medical programs as a springboard to adult-use programs that function much the same way (same suppliers, products, at times distribution channels and pricing models) with some minor adaptations to meet the needs of a wider market. In Europe, conversely, the two are seen very differently – with medical markets often being the primary or exclusive focus. As such, at this juncture most European countries are intent on building up and lifting limitations within their medical markets, where the vast majority of market activity will take place in the coming years. In this sense, serious competitors looking to invest in the medical space can do so relatively well-assured that medical sales will not be cannibalized by adult-use markets.
However, there are various potential exceptions. For example, by 2022, adult-use cannabis will be made legally available in two countries - the Netherlands and Switzerland. Both are pilot programs, meaning sales are limited and there is no guarantee legalization will occur as a result, though the two governments intend to use pilot findings to inform formal adult-use policy considerations after the trials conclude. These pilots – and the wider adult-use programs they may preclude – are intended to be completely separate from the medical markets of each country. While it is possible there will be shared suppliers, they will go through separate, distinct authorization processes and tenders (and in fact, Bedrocan, the exclusive Dutch medical provider, has been very explicit that it will not be involved with adult-use), as well as supply chains. In addition, though it would offer a smaller market, Luxembourg is also intent on legalizing adult-use cannabis in the medium term.
CBD products available over the counter in much of the region also continue to compete with formal medical cannabis markets due to CBD’s broad availability and lower price points, but this phenomenon is expected to be largely temporary. As medical programs professionalize, gain more physician and regulator buy-in and advocacy, become more price-competitive and less stigmatized among patients, the safe and regulated nature of medical cannabis and wider scope of available products, as well as the prospect of insurance coverage, are expected to drive medical market growth by appealing to the myriad patients whose needs are not met by the CBD wellness market.
As many of the long-held fears surrounding cannabis have been proven to be unfounded, and numerous North American and European countries have demonstrated it is possible to create a safe, regulated market for the controlled substance, international organizations are facing increasing pressure from member states to rethink their positions regarding cannabinoids. This is especially true in Europe, where new countries are establishing medical cannabis markets with great frequency and the growth potential remains substantial.
The European cannabis market is well-positioned to grow substantially in the medium term, given the number and scope of medical programs and adult-use trials in line to launch and expand, and opportunities abound for those willing and able to overcome relatively steep barriers to entry, such as EU-GMP certification. In recent years, this market has drawn investment from many large international cannabis companies seeking to set up and expand operations in the continent, though recently there has been a pivot toward European cannabis firms, both new and established, looking to successfully build up operations in the region. Given the cash constraints and investor demands particularly Canadian cannabis entities are facing today, many of the traditional global market behemoths are slowing or even halting operations in various parts of Europe. With these players constrained, 2021 will offer a strategically advantageous opportunity for local players to join the market and thrive with significantly more white space available than was previously – coupled with fewer start-up costs given their geographic proximity and beneficial regional policies.
One caveat, however, is that a number of Canadian licensed producers have in recent years established major grow (Denmark, Portugal) and distribution operations (Germany) in Europe, many of which are just getting off the ground, thus companies like Aurora, Aphria and Tilray will have enhanced reach in the region as those scale to full capacity – even with minimal additional investment.
Today, top competitors in the region include:
Canadian Licensed Producers
In addition, the product approval and registration process is often less complicated for flower than formulated extracts, limiting opportunities for doctors to prescribe other formats. The Polish market has historically entirely consisted of flower for this reason, with the first unlicensed extract to receive URPL approval not hitting the market until late 2020. There are exceptions, however. In places like Portugal where product dosage must be precise and consistent to achieve authorization, producers are instead more driven to seek licensing for the production of less volatile extracts rather than flower.
Countries which have approved the sale of flower typically require it is either used to create a tea or be vaporized rather than smoked, but in spite of this, physicians remain hesitant (and in many cases, unable as it is unlicensed) to prescribe it for medical purposes. These preferences are expected to shift over time as doctors and pharmacists become more comfortable with the range of products, dosages, onset times, and effects of cannabis products, and the stigma flower holds begins to subside. In the meantime, unlicensed extracts such as oils and capsules, which are easy to dose and more familiar to the medical community, remain popular and are in high demand in virtually all markets where available.